The $64 Billion Question

From reducing the deficit to electrifying the railroads, everybody has an idea on how to spend the elusive peace dividend.

Page Content

In 1986, Democrats in Congress pronounced Ronald Reagan's defense spending proposal "DOA"--Dead on Arrival. The cutting and rearranging seemed severe at the time, but back then, standards for measuring severity were different. Compared to the 1991 defense budget presented on January 29, that DOA program in 1986 was a picture of health. If the congressional attack this year turns out to be as radical as the speech-making suggests, defense could sink to uncharted depths.

From the perspective of the defense community, the budget proposal is harsh. It abolishes weapons and force structure by the wholesale lot. Adjusted for inflation and other economic factors, it provides $22.4 billion less in 1991 for defense than did the previous forecast--itself down considerably from earlier projections--issued last April. It takes another $167 billion out of the Five-Year Defense Plan. On top of earlier reductions, that amounts to $231 billion cut from the FYDP in the past twelve months.

By the end of Fiscal Year 1991, the Pentagon says, active-duty US military strength will fall back to where it was in 1980. Army and Air Force troop levels will be at their lowest since 1950.

As seen by others--including some strong-minded members of Congress-- the reductions are timid. A new arms-control offer, announced by President Bush in his State of the Union address, would bring 80,000 US troops home from Europe. That, too, was promptly derided as insufficient.

The stampede to cut defense is driven by two main sources of excitement. One, of course, is the revolution under way in the Soviet Union and eastern Europe. The other is a scramble over shares of the federal budget.

The ceiling set by the Gramm-Rudman- Hollings Act for the 1991 deficit is $64 billion. Even with bogus numbers and voodoo accounting, the government had great difficulty with the $100 billion ceiling for 1990. This year's goal is harder. If the regular process does not bring the deficit within $10 billion (the tolerance allowed) of $64 billion by October 15, Gramm-Rudman will allocate reductions automatically by predesigned formula.

The politicians are desperate for a "peace dividend" as leverage on the deficit. Sen. Jim Sasser (D-Tenn.). Chairman of the Senate Budget Committee, complains that the peace dividend from the 1991 defense budget is a "mere fraction" of what "we'll need to hit next years deficit target under Gramm-Rudman."

It is not simply the Pentagon that Congress must fight to get more deficit-reduction money. Citizens, conditioned to blame defense for hogging all the money, now believe there is to be a windfall, and they are lining up to spend some of it.

Seymour Melman, writing in the New York Times on behalf of the National Commission for Economic Conversion and Disarmament, lays out a program to use an envisioned peace dividend of $165 billion. Housing and education get $30 billion each. There is $10 billion to electrify the US rail system, and so on. In making his pitch, Mr. Melman repeats the old fiction that "half of all federal tax dollars go to the Pentagon."

It would be instructive for Mr. Melman to check the official Budget of the United States Government. From this six-pound document, he will discover that while defense did account for 50.8 percent of the outlays in 1961, its share today is 24.8 percent. By contrast, an aggregate of social and benefit programs that the budget groups as the "Human Resources Superfunction" has progressed from 30.5 percent of outlays in 1961 to 51.5 percent in 1990, rising to 56.0 percent by 1995.

On the present track--even with the reductions being so timid--defense outlays will be just 21.6 percent of the total by 1995. The 1991 proposal is for a 2.3 percent decrease, after inflation, in defense budget authority.

That has implications, both for Mr. Melman's plan to electrify the railroads and for deficit reduction. As Tom Kenworthy observes in the Washington Post, the Gramm-Rudman calculus has changed. The law is no longer the handy tool it once was for squeezing the Pentagon. Half of any automatic cuts still come from defense, which spends about a fourth of the money. The kicker is that cuts are from a "baseline''--last year's level of outlays, plus inflation.

The defense budget is already about $5 billion below its baseline. Automatic cuts might not take it much further down than the level Congress is likely to approve anyway. Some of the pressure from a budgetary impasse would, therefore, shift to domestic programs.

Defense will almost certainly be cut further, not because it's good strategy or because the Pentagon has hogged an ever-growing share of the resources, but because this budget is a movable object in the path of an irresistible force.

The government is confronted here by two tasks. It must resolve the federal deficit and also plan an adequate defense program for uncertain and changing times. Neither objective is well served by emotional or impulsive decisions. Those who insist on seeing an unlimited peace dividend at the end of the rainbow are not helping us reach any responsible solutions.